Envelopes (Price Channel)

It is quite difficult to draw straight support / resistance lines as the market accelerates or slows down its pace. With the help of the indicator we can create a flexible channel which reacts to the market change rate.
It is built on basis of the simple moving average which moves upwards or downwards at some percentage size with the most part of price fluctuations to be within these lines.

Upper border:
U = ( 1 + u / 100 ) x SMA (P, n);
Lower border:
L = ( 1 — d / 100 ) x SMA (P, n), где
U — upper line of the price channel,
L — lower line of the price channel,
u — % above the moving average,
d — % below the moving average,
SMA (P, n) — simple moving average.

The percentage («u» and «d») should be set so that about 95% of price activity is contained within the envelope and 5% outside it. The indicator will then be adequate to the market balance and all prices will come back to the envelope after they exit it.